Filling Out the FAFSA

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CHAPTER 2

The FAFSA is organized as steps, with each step consisting of agroup of related questions. In addition, the FAFSA contains threepages of instructions for the form and one page of worksheets forcalculating additional amounts that are entered in Steps 2 and 4.

This chapter will not repeat the application instructions but willgive guidance for counselors on some of the questions that havearisen. Students can get similar advice on filling out the FAFSA onour Web site for students at http://www.ed.gov/studentaid. Notethat where parents are mentioned it refers to the parents ofdependent students.

STEP ONE: GENERAL STUDENT INFORMATIONPurpose: This section identifies the student and establishes his

eligibility for aid from the FSA programs based on factors such ascitizenship, educational level, and registration with Selective Service.(Volume 1: Student Eligibility explains these eligibility requirements.)Some of the questions are included to help the school package thestudent’s aid award sooner and to eliminate the need for thestudent to fill out a separate state financial aid form.

■ Questions 1-3 ask for the student’s name. The name, along withother identifying information, is used for several data matches.Because the U.S. Department of Education (ED) matches thestudent’s name and Social Security Number (SSN) with theSocial Security Administration (SSA), the name here shouldmatch the name on the student’s Social Security card. Otherwise,other data might not match and the student will be told therewas an inconsistency during processing.

The student should be very careful when entering his SSN;although it can be corrected after the SAR is produced, thenumber originally entered will always be used as the student’s ID,and it is likely to cause confusion and extra work for the financialaid administrator if it doesn’t match the student’s SSN. To solve

FAFSA Steps 1-7Step One—General student infoStep Two—Student’s financial dataStep Three— Dependency questionsStep Four— Parental financial data (dependent students only)Step Five—Household size (independent students only)Step Six—Schools and school codesStep Seven—Signature(s)

Completing the FAFSAInformation for students about complet-ing the FAFSA is posted on the Web at

www.ed.gov/prog_info/SFA/FAFSA

You may wish to add a link from pagesthat students use on your Web site tothis reference information.

Filling Out theFAFSABecause the FAFSA is the first step in the financial aid process, it’s importantthat the form be completed correctly. In this chapter we discuss some of themore difficult questions that arise when filling out the line items on theFAFSA. For more information on how these line items are used to calculatethe expected family contribution, see Volume 1: Student Eligibility.

sm

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Application and Verification Guide 2002-2003

this problem the student can file a new original FAFSA using thecorrect SSN.

■ Questions 4-7 ask for the student’s permanent mailing address.This is not a school address, with one exception: An incarceratedstudent must use his college’s administrative address and includewith the FAFSA a letter from the school indicating that he isincarcerated and is using the school’s address.

■ Question 8 asks for the student’s SSN. With the exception notedin the margin, a student must have an SSN to apply for federalfinancial aid. If the student submits a FAFSA without an SSN,the FAFSA will be returned to the student unprocessed. To getan SSN or to determine what the number is if a student’s SocialSecurity card has been lost, the student must contact the localSocial Security Administration office. For more information, callthe SSA at 1-800-772-1213 (TTY: 1-800-325-0778).

■ Question 13 asks about U.S. citizenship and eligiblenoncitizenship. Examples of noncitizenship categories are givenin the FAFSA instructions, and a detailed discussion ofcitizenship issues can be found in Volume 1: Student Eligibility.Only a citizen or an eligible noncitizen is eligible for aid fromthe FSA programs; however, a student should still submit theFAFSA if she might be eligible for aid from institutional orprivate sources that do not require citizenship.

■ Questions 15 and 16 ask about the student’s marital status “asof today”— the day the application is completed. Marital statuscannot be projected.

■ Questions 17-21 ask whether the student plans to attend fulltime, three-quarter time, half time, less than half time, or not atall during upcoming terms. This information will help thecollege package the student’s aid. A student who is applying tomore than one school should provide the enrollment status andterms at the school he is most likely to attend. A student who isnot sure should mark “Full time.”

A student attending a traditional semester-based school shouldfill out information for Fall 2002 and Spring 2003 (a winter termis not usually an option at such schools).

■ Questions 22 and 23 ask for the highest level of school completedby the student’s father and mother. Some state agencies use thisinformation to award grants and scholarships. “Father” and“mother” in these questions mean the student’s birth parents oradoptive parents, but not stepparents or foster parents. Note thatthis definition of parents is unique to this question. All otherquestions use the definition given on page 7 of the FAFSA.

STEP 1Questions 4-21

Student information

No SSN requirement for PacificIsland ResidentsA student from the Republic of theMarshall Islands, the Federated Statesof Micronesia, or the Republic of Palauis not required to have an SSN. He orshe should submit the FAFSA to the fol-lowing address (not to the one printedon the FAFSA envelope):

Federal Student Aid ProgramsP.O. Box 4003Mt. Vernon, Illinois 62864-8603

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Ch. 2— Filling Out the Application

■ Questions 24-26 ask for the student’s state and date of legalresidence. This information is used in the EFC calculation todetermine the appropriate allowance for state and other taxespaid by that state’s residents.

It also indicates which state agency should receive the student’sFAFSA information. States have varying criteria for determiningwhether the student is a resident for purposes of state financialaid. However, residing in one state for four years will meet anystate’s criteria. Therefore, a person answering “Yes” to question25 will likely meet the residency requirements of that state, whilethe state eligibility for a person answering “No” will depend onthe date reported in question 26 and the specific state’srequirements.

■ Question 30 asks for the student’s grade level at the beginningof the 2002-03 school year. This question helps establish howmuch money the student may borrow under federal loan limits.Note that grade level is not based on the number of years thestudent has attended college, but on work completed towardsthe degree/certificate. For instance, a full-time student mightattain 2nd-year grade level after one year of study, while a half-time student would take two years to reach that level.

■ Question 32 asks whether the student will have a first bachelor’sdegree before July 1, 2002, because eligibility for Federal PellGrants and Federal Supplemental Educational OpportunityGrants (FSEOGs) is almost exclusively restricted to students whohave not yet received bachelor’s degrees.

■ Questions 33 and 34 ask the student to indicate what types ofaid, in addition to grants, she is interested in receiving. This willhelp the school in packaging the student’s award. If a studentisn’t sure about wanting loans or work-study, she should answer“Yes.” That way the student will be considered for all types of aidthat are available; at a later date, the student can decline anyawarded aid she doesn’t want. If the student doesn’t want to takeout a loan but the parents of the student want to get a PLUSloan, this question should be answered “Yes.”

■ Question 35 asks whether the student has been convicted of anyillegal drug offense. Students who have been convicted are notnecessarily ineligible for aid. They should still complete andsubmit the FAFSA because even if they are ineligible for federalstudent aid, they may be eligible for state or institutional aid—many states and schools use the data supplied by the FAFSA toaward their aid.

Students who answer “Yes” to question 35 and who fill out apaper original FAFSA will receive a worksheet with their SAR todetermine whether the conviction affects their eligibility for


Student information

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federal student aid. If the date the student regains eligibilityfor aid falls before July 1, 2002, the worksheet will instruct thestudent to change the response to a “1,” indicating full eligibilityfor the award year. If the date of eligibility falls between July 1,2002 and June 30, 2003, then the student will not be eligible forpart of the award year and will need to change the response to a“2.”

If the date of eligibility falls after June 30, 2003, then thestudent’s response will remain a “3”—the student will not beeligible for federal aid during the award year unless hecompletes a qualified drug rehabilitation program, though hemight be eligible for state or school aid. (See Volume 1: StudentEligibility for more information on drug convictions andeligibility.)

Students applying with a paper Renewal FAFSA who marked a“3” in the previous year will automatically receive a worksheet,and students using one of the electronic applications will be ableto determine the correct response (1, 2, or 3) to the questionbefore submitting their application.

A student who leaves FAFSA question 35 blank cannot be paidFSA funds until he provides that information by submitting acorrected SAR or ISIR.

STEP TWO: STUDENT/SPOUSE INCOME AND ASSETSPurpose: Questions 36-51 collect the student’s (and spouse’s)

income and asset information. The FAFSA collects similar informationabout parents’ income and assets in Step Four, so we will discuss howthese questions affect the parents as well as the student and spouse.Income information is used along with living allowances based onhousehold size to calculate the student’s (and spouse’s) portion of theEFC.

If the student or the student’s parent wasn’t married in 2001 but ismarried at the time the application is completed, the applicant alsoneeds to provide income and asset information for the new spouse. Ifthe student or the student’s parent was married in 2001 but is nowseparated or divorced, or the spouse has died, the student or parentdoesn’t provide income and asset information for his spouse, eventhough that information may be on the 2001 tax forms.

The FAFSA asks for “base-year income” and taxes paid becausestudies have shown that income from the completed tax year is agood predictor of the family’s financial situation for the currentyear. The base year for 2002-03 applicants is the 2001 tax year, so theFAFSA questions reference lines on the 2001 IRS tax forms. If2001tax data is not available yet, best estimates of the data can beused on the application, but the student will have to later correct itif the 2001 tax return then differs from the estimates.

Income and Assets CitesSec. 480(a), (b), (f), (g)

STEP 1Question 35

Drug convictions

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The FAFSA also collects information for certain investments andassets. Applicants only report the net worth of assets, instead ofreporting the value and debt. They should report asset amounts asof the date the application is completed.

■ Questions 36-38 (70-73 for parents) ask the student if she hascompleted a 2001 tax return yet, which income tax return wasfiled or will be filed, and whether the student was eligible to filea 1040A or 1040EZ. ED’s CPS uses this information in part toidentify who is eligible for the simplified needs test (see marginnote for questions 47-51, Assets).

■ INCOME: Questions 39-43 (74-77 for parents) ask the student(and spouse) for the adjusted gross income (AGI) and numberof exemptions. Dependent students report these items for theirparents as well. Each question gives the line reference to the2001 IRS tax forms. It will be easier for students to completethese income and tax-related questions if they’ve alreadycompleted their tax returns. The student can also estimateanswers, but if the estimated information is wrong, the studentmust correct the FAFSA information when the tax return is filed.We’ve provided a worksheet to help students estimate their taxinformation.

Students or parents who filed a joint return but are now divorcedor separated won’t be able to copy the information from the taxforms. Instead, they must figure out how much of the incomeand taxes paid is attributable to them. For more on thiscalculation, see “Using a Joint Return to Figure Individual AGIand Taxes Paid” in chapter 3.

If the student, spouse, or parents were not required to fill out atax return, the student should report any income earned fromwork in lines 42-43 (student and spouse) and/or lines 76-77(parents). The W-2 form and other records should be used todetermine these amounts. (Income earned from work isnormally used to calculate an allowance for the additional costsincurred for working families—however, if no tax return wasfiled, the income earned from work will also be used in place ofAGI.)

For a fiscal year tax return, as opposed to a return for thecalendar year, the applicant should report information from thefiscal year tax return that includes the greater number of monthsin 2001.

If the student or parents filed a tax return using other than anIRS form, such as a foreign or Puerto Rican tax form, the studentshould report on the FAFSA the amounts (converted to U.S.dollars) from the lines of the non-IRS form that correspond mostclosely to those on the IRS forms.


and 70-77 (Income)

Other Tax FormsThe following tax forms are consideredalternatives to a U.S. Form 1040A and1040EZ: the income tax returns requiredby the tax codes of the Commonwealthof Puerto Rico, Guam, American Samoa,the U.S. Virgin Islands, the Republic ofthe Marshall Islands, the FederatedStates of Micronesia, or the Republic ofPalau. Information from these taxreturns would be reported on the FAFSAin the same manner as U.S. taxinformation, and copies of these formscan be used for verification in the sameway as U.S. tax forms are. Amountsare already reported in U.S. dollars andthe school should look at tax return lineitems that are comparable to the U.S.line items for verification.

Fiscal Year Return ExampleOwen’s parents file a fiscal year tax re-turn. They start their fiscal year in Sep-tember. The return they filed for the fis-cal year starting in September 2000 in-cludes eight months in 2001. The re-turn they’ll file for the fiscal year startingin September 2001 only includes fourmonths in 2001. Therefore, they shoulduse the information from the tax returnfor the fiscal year that started in Sep-tember 2000.

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Wages, salaries, tips, etc.

Interest income

Dividends

Other taxable income (alimony received, business and farm income,capital gains, pensions, annuities, rents, unemployment compensation,Social Security, Railroad Retirement, and all other taxable income)

Add all of the numbers in the column

Subtract IRS-allowable adjustments to income (payments to IRAand Keogh Plans, one half of self-employment tax, self-employedhealth insurance deduction, interest penalty on early withdrawalof savings, and alimony paid)

TOTAL — Write this amount in question 39 or 73:

Estimated AGI Worksheet

Use this worksheet to estimate 2001 Adjusted GrossIncome (AGI) if you do not have a tax return.

$ .00 .00$

.00 .00$$

.00 .00++

.00 .00++

.00 .00++

.00 .00==

.00 .00 — —

For question 39Student/Spouse

For question 73Parent(s)

Verifying “0” incomeOccasionally, an applicant will file a FAFSA reporting 0 income for the base year. This can occur when theapplicant’s family has tax writeoffs that produce a negative AGI or when the applicant neglected to reportsome types of untaxed assistance. Zero income is noted in our CPS edits and may increase the likelihoodthat the applicant will be selected for verification.

If the CPS does not select the student for verification, you may still choose to ask the applicant for furtherinformation regarding his or her means of support during the base year.

Any cash support or money paid on behalf of the student, other than support from a parent, must bereported on Worksheet B and thus counted as untaxed income. If the student subsisted solely on in-kindhelp from a friend or relative, for instance, using a room at an aunt’s house and eating meals with heraunt’s family, you may use professional judgment to adjust the untaxed income line item to include theestimated value of that in-kind support. Similarly, you may adjust the income line items to reflect othersources of income when the family’s tax return has a zero or negative AGI.

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Worksheets A, B, and C forquestions 44-46 and 78-80

Untaxed items are grouped in the worksheets on the back of the FAFSA. Theapplicant doesn’t submit the worksheets themselves, but reports the totals from theworksheets in FAFSA items 44-46 (student/spouse) and 78-80 (parents). The totalsfrom Worksheets A and B are added to untaxed income; the totals from Worksheet Care subtracted from AGI.

■ Worksheet A (questions 44 and 78) asks for several types ofuntaxed income and benefits that are typically associated withthe neediest households; this worksheet helps aid offices toidentify applicants who might have more financial need.

Two of the items to be reported on this worksheet appear on thetax form, even though they are not taxed: the Earned IncomeCredit (EIC) and the additional child tax credit. If parents file ajoint tax return and qualify for the EIC but then separate ordivorce before the student files the FAFSA, the parent withwhom the student lived longer in the last 12 months woulddetermine his or her portion of the EIC by using the tax table orproportional distribution calculations. See “Using a joint returnto figure individual AGI and taxes paid” in chapter 3.

Some income that is not reported on the tax return should alsobe reported on Worksheet A:

➔ Welfare benefits, including Temporary Assistance for NeedyFamilies (TANF). TANF is the name for the state-administeredplans that replaced Aid to Families with Dependent Children(AFDC or ADC). While rent subsidies for low-income housingare a form of welfare, they are not counted on the FAFSA.

➔ Untaxed Social Security benefits. Worksheet A asks for “SocialSecurity benefits received that were not taxed.” Tax filers candetermine this amount from the IRS form 1040 by subtractingthe taxable portion of Social Security benefits from total SocialSecurity benefits.

■ Worksheet B (questions 45 and 79) collects information aboutother untaxed income and benefits. Some forms of income arereported on the tax form even though they aren’t taxed. Again,a student who hasn’t filed will have to estimate these amounts,and students or parents may need to separate information froma joint return.

STEP 2Worksheet A

Untaxed income

The EIC and tax filingThe Department encourages studentsand parents of dependent studentswho are eligible for the EIC to file a taxreturn and claim the credit.

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Worksheet B items that are answered from tax forms are:

➔ Payments to tax-deferred or sheltered pension and savingsplans (paid directly or withheld from earnings). This includesuntaxed portions of 401(k) and 403(b) plans. These types ofpayments are listed in boxes 12a through 12d of the W-2 andwill have one of the following codes: D, E, F, G, H, or S. Notethat employer contributions to these plans shouldn’t bereported as an untaxed benefit.

➔ Deductible IRA or Keogh payments. If the student, spouse, orparent can exclude from taxation payments to an IRA or Keogh,those payments are reported as untaxed income. Theseamounts are reported on the tax return. Payments intoEducation IRAs aren’t deductible, so they shouldn’t be includedin this amount.

➔ Tax-exempt interest income. Certain types of interest, such asinterest on municipal bonds, are tax-exempt. This amount is onthe tax return.

➔ Foreign income exclusion. If a U.S. tax filer earns foreignincome, part of that income might be excluded from taxableincome (using a Form 2555 or 2555EZ). This income counts asuntaxed income, so the FAFSA tells the applicant to include theamount from line 43 of Form 2555 or line 18 of Form 2555EZ inWorksheet B.

➔ Untaxed IRA distributions and pension payments. Certainpayments from IRAs or pensions are excluded from taxation. Atax filer determines how much of his IRA distribution orpension payment is taxable when he completes the tax return.The applicant needs to report these untaxed amounts on theFAFSA. Worksheet B explains how to determine the amountusing the tax return.

➔ Credit for Federal tax on special fuels—nonfarmers only.Certain tax filers can claim a tax credit for excise taxes they paidduring the year on some kinds of fuels. IRS Form 4136 is usedto claim this credit, and Worksheet B directs the applicant tocopy information from that form.

Worksheet B income not reported on the tax return:

➔ Child support received for all children.

➔ Housing, food, and other living allowances. Some people,particularly clergy and military personnel, receive these kinds ofallowances as compensation for their jobs. Money received topay for rent should be reported. For the free use of a house orapartment, the rent (market value) of a comparable house orapartment should also be reported. Similarly, if the student

STEP 2Worksheet B

Untaxed income

Box 14 Items on the W-2The Department has reported that in-come listed in box 14 of the IRS’s W-2form may be disregarded. There area few reasons for this: several of theitems that the IRS suggests could bereported in box 14 are captured al-ready on the FAFSA (in adjusted grossincome for instance); also, employerscould include in box 14 certain non-elective pension plan contributions,and non-elective contributions shouldnot be counted in the need analysis; fi-nally, because no employer is requiredto provide information in box 14, it isunlikely that employers will be consis-tent in what they report there.

There are exceptions though. For ex-ample, clergy parsonage allowancesare frequently reported in box 14,though as stated above, employersaren’t obliged to do that. Whethersuch allowances appear in box 14 ornot, they should be included in the ap-propriate space on Worksheet B of theFAFSA. Also, the United States PostalService (USPS), with approximately850,000 employees, currently reportsin box 14 voluntary employee contribu-tions to the Thrift Savings Plan (TSP),which is a retirement plan for federalemployees. These contributionsshould be included on Worksheet B asuntaxed income. Other federal agen-cies put TSP contributions in the box forpension plan payments (box 13 on the2000 W-2 and box 12 on the 2001 W-2), which therefore appear in the pen-sion and savings blank on WorksheetB. The USPS is considering putting TSPcontributions on the 2002 W-2 in thesame box other federal agencies do.

If you find a box 14 item that belongson Worksheet B, you can include it.

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received free room and board in 2001 for a job that was notawarded as student financial aid, the student must report thevalue of the room and board as untaxed income. Do notinclude rent subsidies for low-income housing.

➔ Veterans’ noneducation benefits. This includes benefits such asthe Death Pension or Dependency & Indemnity Compensation(DIC).

➔ Any other untaxed income not reported elsewhere. This caninclude worker’s compensation, VA Educational Work-Studyallowances, interest income on Education IRAs, untaxedportions of Railroad Retirement Benefits, Black Lung Benefits,Refugee Assistance, the untaxed portion of capital gains, andforeign income that wasn’t taxed by any government.

➔ Cash support. The student reports any cash support he hasreceived, except that a dependent student doesn’t reportsupport received from his parents. The student also must reportany money paid to someone else on his or her behalf. Forexample, if a friend or relative gives the student grocery money,it’s reported as untaxed income. If the friend or relative paysthe student’s electric bill or part of the student’s rent, thestudent must report those payments as untaxed income. Forexample, if the student is living with a friend who pays the rentand the student’s name is the only one on the lease, the rentpaid is counted as cash support. Because the student’s name ison the lease, he is responsible for the payments, and the friendis paying rent on his behalf. Note that the column for parents’information is marked out for this line item—only the studentreports this information.

TIPS on reporting BENEFITS:The applicant reports the actual amount of benefits received for the year in question,even if the amount is an underpayment or an overpayment that will be corrected inthe next year. However, if the underpayment or overpayment was adjusted in thesame year, only the net amount received during that year would be reported.

Any benefits received by the head of household on behalf of anyone included inhousehold size as reported on the FAFSA are income to the head of the household.However, if members of the household, such as an uncle or grandmother, receivebenefits in their own names, those benefits are not reported as income of the headof household. Note that these people can’t be included in household size if theyreceive benefits, in their own names, that amount to more than half of their support.

Dependent Benefits ExamplePaul receives Social Security benefits, butbecause he’s a minor, the benefits arepaid to Laurel, his adoptive parent, onhis behalf. Laurel has to report thesebenefits as her untaxed income whenshe completes her FAFSA, even thoughthe benefits are for Paul.

Stanislaw’s Uncle Yvor lives with him.Yvor receives a small disability paymenteach month. This amount is paiddirectly to Yvor, so Stanislaw doesn’treport it as income when he completesthe FAFSA. The payment is small enoughthat Stanislaw is still providing morethan half of Yvor’s support, and so heincludes Yvor as a dependent in hishousehold size. However, next yearYvor expects to also start receiving apension. The combination of thepension and the disability payment willbe enough that Stanislaw won’t beproviding more than half of Yvor’ssupport and therefore won’t be able toinclude Yvor in his household size anymore.

STEP 2Worksheet B

Untaxed income

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Income and benefits not to be included on Worksheet B:

➔ Student aid is taken into account in packaging aid (discussed inVolume 1: Student Eligibility) and shouldn’t be counted as abenefit. Student financial aid includes tuition benefits a parentreceives for a dependent (for example, from the parent’semployer). Note that student aid that was included in the AGI isreported separately as an exclusion on Worksheet C so that it canbe subtracted from income.

➔ Payments and services received from states for foster care oradoption assistance, under Part A or Part E of Title IV of theSocial Security Act.

➔ Per capita payments to Native Americans. Per capita paymentsreceived in 2001 from the Per Capita Act or the Distribution ofJudgment Funds Act should not be reported unless they exceed$2,000. Any amount over that would be reported as untaxedincome.

➔ Heating/fuel assistance. This includes payments or allowancesreceived under the Low-Income Home Energy Assistance Act(LIHEA). Payments under the LIHEA are made through stateprograms that may have different names.

➔ Flexible spending arrangements. These are employee benefitprograms, sometimes also called “cafeteria plans.” Neithercontributions to nor payments from these programs should becounted as untaxed income.

➔ In-kind support. In-kind support is other than money, such asfree food or housing. If friends or relatives give the studentfood or allow the student to live with them rent-free, thatsupport isn’t included as untaxed income, though an FAA mayuse professional judgment to reduce the cost of attendance forindependent students who receive such in-kind support. This isnot the same as housing and other allowances received ascompensation for a job, which, as stated earlier, must bereported. If the student is living with someone who is payingliving expenses, it can be difficult to determine whether thesupport is cash support or in-kind support. The basic rule is: ifsomeone pays money that the student would otherwise pay, thatmoney is counted as cash support. See examples in the margin.

■ Worksheet C (questions 46 and 80) collects information on itemsthat are included in taxable income on the tax return but areexcluded from income when calculating the EFC. The applicantdoesn’t subtract these from the AGI reported on the form butlists them separately on Worksheet C. The total from theworksheet is then reported on the FAFSA. The CPS subtractsthat total from the AGI. Having the AGI from the tax returnlisted on the application makes verification easier.

Cash support (reported onworksheet B)Support includes money, gifts, andloans, plus housing, food, clothing, carpayments or expenses, medical anddental care, and college costs paid foron the student’s behalf.

Examples of in-kind income (notreported)

• Food Stamp Program

• Women, Infants, and Children Pro-gram (WIC)

• Food Distribution Program

• National School Lunch and SchoolBreakfast programs

• Commodity Supplemental Food Pro-gram (CSFP)

• Special Milk Program for Children

• Daycare provided by the Social Ser-vices Block Grant Programs (if the recipi-ent receives reimbursement forchildcare expenses, that amount is re-ported as income)

• WIA (formerly JTPA) educational ben-efits

• Rollover Pensions

• Payments and services received fromstates for foster care or adoption assis-tance, under Part A or Part E of Title IV ofthe Social Security Act

STEP 2Worksheet B

Untaxed income

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Worksheet C items that can be found on tax forms are:➔ Education tax credits. These are the Hope and Lifetime

Learning tax credits; the application tells students where thisinformation is on the tax return.

➔ Taxable earnings for FWS or other need-based work programs.The student may have received W-2s for these earnings.Otherwise, students will need to use any other records theyreceived showing how much they earned.

➔ Student grant and scholarship aid. A student includes theamount of grants and scholarships she received that exceeds hertuition, fees, books, and supplies as part of her taxable income.The tax filer is also supposed to write this amount separately onthe tax form next to the line where wages and other earningsare reported. If the information was reported this way, thestudent can copy that amount from the tax form.

Other items, not from tax forms, to be reported in Worksheet C:

➔ National and Community Service (Americorps) awards. TheNational and Community Service Trust Act of 1993 allows one toearn money to pay for college or repay Title IV student loans byfilling unmet community needs. Living allowances, educationawards, and interest accrual payments reported as incomeshould be reported as an exclusion. Do not list on Worksheet CAmericorps earnings or payments for health care or child care.

➔ Child-support payments. Any child-support payments madeduring 2001 by the student, spouse, or parent whose income isreported on the FAFSA should be reported as an exclusion.However, don’t include child support paid for a child includedin the household size reported on the FAFSA.

■ ASSETS: Questions 47-51 (student and spouse) and 81-83(parents) An asset is defined as property that is owned by thefamily and has an exchange value. A student does not report asassets possessions such as a car, a stereo, clothes, or furniture.

The FAFSA collects information about three types of assets inaddition to cash, savings, and checking accounts: investments,businesses, and investment farms. Most assets are investments;some examples are college savings plans, real estate, trust funds,mutual funds, money-market funds, stocks, bonds, commodities,and precious metals. If the asset isn’t a business or investmentfarm, it should be reported as an investment.

The law exempts certain assets from consideration for studentaid purposes. Therefore, a family’s principal place of residenceis not reported as an asset, even if it is part of a family business.Neither is a family farm reported as an asset, only investmentfarms are (see the note in the margin on the next page).

STEP 2Worksheet C

Excluded income

Rental PropertiesSometimes the student or parent willclaim that rental properties represent abusiness. Generally, rental propertiesmust be reported as real estate ratherthan as business assets. To be reportedas a business, a rental property wouldhave to be part of a formally recognizedbusiness. (Usually such a businesswould provide additional services, suchas regular cleaning, linen, or maidservice.)

Child Support Payments ExampleSteven is married; he and his wife haveone child. He’s also paying child supportfor a child he had with another woman.This child doesn’t live with Steven andhis wife, but because he’s providingover half the child’s support (through hischild support payments), he counts thechild in his household size. Therefore,he doesn’t report the amount of childsupport he pays in Worksheet C on hisFAFSA. Steven’s wife is also paying childsupport for a child of hers that doesn’tlive with her. She isn’t providing over halfthe child’s support, so the child isn’t in-cluded in Steven’s household size.Therefore, Steven can report the amountof child support his wife pays inWorksheet C on his FAFSA.

Education savings accountsEducation IRAs have beenappropriately renamed educationsavings accounts; they are consideredan investment asset for the studentbeneficiary.

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The FAFSA asks for the net worth of an investment, which is thetotal current market value of the investment minus those debtsthat are related to the investment. If the net worth is negative,the student reports a net worth of zero on the application.

Similarly for businesses and investment farms, the current networth is reported for land, buildings, machinery, equipment,livestock, and inventories. The current market value of abusiness or investment farm is reduced by the debt owed on it todetermine the net worth. Business or farm debt means onlythose debts for which the business or investment farm was usedas collateral.

Excluded assets—not reported on the FAFSA:

➔ Prepaid tuition plans. As discussed on the next page, theseplans allow units of tuition to be bought before the studentattends college. Distributions from a prepaid tuition plan areapplied to the beneficiary’s higher education expenses and areincluded as part of the financial aid package. This isaccomplished in one of two ways: either by reducing thestudent's cost of attendance by the amount of the distribution,or by including the amount of the distribution as a resource andestimated financial assistance. For the FAFSA, the investmentvalue of prepaid tuition plans is not reported as an asset ofeither the holder or the beneficiary.

➔ Pensions and whole life insurance. Pensions aren’t counted asassets for application purposes. Of course, when the incomefrom a pension is distributed to the beneficiary, the incomemust be reported. The cash value or built-up equity of a lifeinsurance policy (often referred to as a whole-life policy) isn’treported as an asset. The Education IRA is counted as an assetfor the student beneficiary because, despite its name, it isn’t aretirement account.

➔ Excluded assets for Native American students. The lawexplicitly excludes reporting any property received under thePer Capita Act or the Distribution of Judgment Funds Act (25United States Code 1401, et seq.), the Alaska Native ClaimsSettlement Act (43 United States Code 1601, et seq.), or theMaine Indian Claims Settlement Act (25 United States Code1721, et seq.).

■ Questions 50 and 51 ask about the student’s veterans educationbenefits and for how many months they will be received. Ifstudents receive veterans education benefits, they must reportthe amount of monthly benefits they expect to receive duringthe school year (from July 1, 2001 through June 30, 2002).Benefits include a range of assistance from the U.S. Departmentof Veterans Affairs (VA), such as the Montgomery GI Billbenefits. Veterans education benefits are not used in the EFCcalculation. Instead, the law requires that VA education benefits


and 81-83 (Assets)

Simplified Needs TestThe law provides a “simplified EFC”calculation for a student who meetscertain income and tax-filingrequirements. If the applicant is eligiblebased on the information on theFAFSA, the CPS will automaticallyexclude family assets from the EFCcalculation. However, all applicantsshould include asset information—evenif it isn’t taken into account whencalculating the EFC, some states andschools require this information for theirown aid programs.

Family FarmA farm (including equipment, livestock,etc.) isn’t reported as an investment onthe FAFSA if —➔ it is the principal place of residencefor the applicant and the applicant’sfamily, and ➔ the applicant (or parents of adependent applicant) materiallyparticipated in the farming operation.

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and 81-83 (Assets)

Qualified state tuition plansSome states sponsor plans that may also be known as qualified state tuitionprograms (QSTPs). Because these plans are covered in section 529 of the tax code,they may also be called section 529 plans. The IRS defines two types of QSTPs:

Prepaid tuition plans allow a person to buy tuition credits or certificates, which countas units of attendance. The number of units doesn’t change, even though tuition willlikely increase before the beneficiary gets to use the tuition credits. Prepaid tuitionplans are not counted as assets; see Excluded assets on the opposite page.

State-sponsored college savings plans allow a benefactor to deposit money into anaccount that will be used for the beneficiary’s college expenses. The buyer does notprepurchase tuition credits as with a prepaid tuition plan. Rather, this type of plan isessentially a special savings account. The value of a college savings plan should betreated as an asset of the owner and not the beneficiary, because the owner canchange the beneficiary at any time.

If a student receives a distribution from a state-sponsored college savings plan, thedistribution will be incorporated into the student’s adjusted gross income (AGI), andso will be treated as taxable income of the student, in keeping with Internal RevenueService rules on treatment of this income.

Reporting “take-back” mortgagesIn a “take-back” mortgage, the seller takes back a portion of the mortgage from thebuyer and arranges for the buyer to repay that portion of the mortgage to the seller.For IRS purposes, the seller must report the interest portion of any paymentsreceived from the buyer on Schedule B of IRS Form 1040. Therefore, if an amount isreported on this line of the tax return, the family probably has an asset that shouldbe reported on the FAFSA. The value of the take-back mortgage is the value that thestudent should report. There would be no debt reported against this asset. Forinstance, if the family sold its house for $60,000 and had a take-back mortgage of$20,000, the family should report $20,000 as the net worth of the investment. Thisamount will decrease each year, depending on how much of the principal the buyerpaid back that year. (This concept would also apply to other forms of seller financingof the sale of a home or other property.)

be counted as a resource or estimated financial assistance whenpackaging campus-based aid or Stafford/PLUS loans. (SeeVolume 1: Student Eligibility for exceptions and further details onpackaging FSA funds with VA educational benefits.)

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Reporting trust fundsTrust funds in the name of a student, spouse, or parent should be reported as that person’s asset on the application. As a generalrule, the applicant must report the trust as an asset, even if the beneficiary’s access to the trust is restricted. If the settlor of a trusthas voluntarily placed restrictions on the use of the trust, then the student should report the present value of the trust as an asset, asdiscussed below. If a trust has been restricted by court order, however, the student should not report it as an asset. An example ofsuch a restricted trust is one set up by court order to pay for future surgery for the victim of a car accident.

The way in which the trust must be reported varies according to whether the student (or dependent student’s parent) receives orwill receive the interest income, the trust principal, or both. In the case of divorce or separation, where the trust is owned jointly andownership is not being contested, the property and the debt are equally divided between the owners for reporting purposes, unlessthe terms of the trust specify some other method of division.

Interest onlyIf a student, spouse, or parent receives only the interest from the trust, any interest received in the base year must be reported asincome. Even if the interest accumulates in the trust and is not paid out during the year, the person who will receive the interestmust report an asset value for the interest he or she will receive in the future. The trust officer can usually calculate the presentvalue of the interest the person will receive while the trust exists. This value represents the amount a third person would be willingto pay to receive the interest income that the student (or parent) will receive from the trust in the future.

Principal onlyThe student, spouse, or parent who will receive only the trust principal must report the present value of his or her right to the trustprincipal as an asset. For example, if the principal is $10,000 and it reverts to a dependent student’s parents when the trust ends in10 years but the student is receiving the interest earned from the trust, the student must report as a parental asset the present valueof the parents’ rights to the trust principal. The present value of the principal is the amount that a third person would pay at thepresent for the right to receive the principal 10 years from now (basically, the amount that one would have to deposit now to receive$10,000 in 10 years, including the accumulated interest). Again, the present value can be calculated by the trust officer.

Both principal and interestIf a student, spouse, or parent receives both the interest and the principal from the trust, the student should report the present valueof both interest and principal, as described in the discussion of principal only. If the trust is set up so that the interest accumulateswithin the trust until the trust ends, the beneficiary should report as an asset the present value of the funds (both interest andprincipal) that he or she is expected to receive when the trust ends.

Ownership of an assetIn some cases the ownership of an asset is divided or contested, which can affect how the student reports the asset:

Part ownership of assetIf the parent or student has only part ownership of an asset, the student should report only the owned part. Generally the value ofan asset and debts against it should be divided equally by the number of people who share ownership unless the share of the assetis determined by the amount invested or the terms of the arrangement specify some other means of division.

Contested ownershipAssets shouldn’t be reported if the ownership is being contested. For instance, if the parents are separated and can’t sell or borrowagainst jointly owned property because it’s being contested, the parent reporting FAFSA information would not list any net worthfor the property. However, if the ownership of the property is not being contested, the parent would report the property as an asset.If ownership of an asset is resolved after the initial application is filed, the student can’t update this information.

Lien against assetIf there’s a lien or imminent foreclosure against the asset, the asset would still be reported until the party holding the lien or makingthe foreclosure completes legal action to take possession of the asset. If the status of the property changes after the application isfiled, the student can’t update the asset information.

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Dependency status

STEP THREE: DEPENDENCY STATUSPurpose: Over the years, most institutional financial aid policies

have been based on the premise that the family is the first source ofthe student’s support. The law governing the FSA programs hasfollowed the same principle. However, like traditional need analysissystems, the law provides several criteria where the student isautomatically considered to be independent of his parents. Notethat whether the student lives with her parents does not affect thestudent’s dependency status.

If the student is considered to be a dependent of his parents,information on the income and assets of the parents must be collectedon the financial aid application. The CPS will calculate a parentalcontribution and add it to the student’s contribution.

In unusual cases, an aid administrator can determine that a studentwho doesn’t meet the criteria should still be treated as an independentstudent. (See discussion of “Dependency overrides”)

■ Question 53 (graduate or professional study). The FAFSA asksthe student if she will be working on a master’s, doctorate, orgraduate certificate program in the school year. A student whoanswers “Yes” to this question is a graduate or professionalstudent and is independent for purposes of Title IV aid.

Graduate and professional students aren’t eligible for PellGrants, so a student who incorrectly answers “Yes” to thisquestion must submit a correction before he or she can get a PellGrant.

Students should fill out the FAFSA based on their grade level atthe start of the school year. If a dependent student completesher undergraduate program during the year and beginsgraduate school, she can update the answer to the dependencyquestion on the SAR or ISIR so that the CPS can reprocess herapplication, or the aid administrator at the graduate school canrecalculate her EFC and use it to package her graduate aid.

■ Question 54 (married). This question must be answeredaccording to the student’s marital status at the time the FAFSA iscompleted. If the student is married and a divorce is planned,the student must file as married. If the student is engaged to bemarried, the student must still file as unmarried, unless he or shewaits until after the marriage to complete the FAFSA. Note thata student cannot update FAFSA information for changes inmarital status after the application is filed.

If the student has a relationship that meets the criteria forcommon-law marriage in his or her state, the student isconsidered to be married. A married student who is separated(not divorced) is considered married for determiningdependency status.

Criteria for independenceFor the 2002-2003 award year, a stu-dent is automatically independent if heor she meets any of the following crite-ria:

• The student was born before January1, 1979.• The student is a graduate or profes-sional student.• The student is married on or beforethe date he or she applies.• The student is an orphan or is or wasuntil 18 a ward/dependent of the court.• The student is a veteran of the U.S.armed forces.• The student has dependents otherthan a spouse.(Cite: Sec. 480(d) of HEA)

Independent student withparental support exampleDoug is a graduate student at GuerreroUniversity. Because he’s a graduatestudent, he’s independent. However,he’s still living with his parents, and hasno income of his own. Although theFAA at Guerrero can’t make Doug a de-pendent student, she decides to add anamount to his untaxed income as re-ported in Question 46 to account for theliving expenses his parents are paying.

Student living with relativesexampleMalia’s father is dead, and her mothercan’t support her, so Malia’s living withher grandmother. Her mother doesn’tpay any money for her support. Maliadoesn’t meet any of the independencecriteria, so she has to provide parentalinformation. Because her grandmotherhasn’t adopted her, her grandmotherisn’t her parent. Malia will have to pro-vide information about her mother onthe form, unless her school decides todo a dependency override.

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Dependency status

■ Questions 55-56 (children and legal dependents). Students whohave legal dependents are independent. Legal dependentscomprise children (including those who will be born before theend of the award year) of the student who will receive more thanhalf their support from the student and other persons (except aspouse) who will both live with and receive more than half theirsupport from the student. The same criteria apply to householdsize.

■ Question 57 (orphan or ward of the court). The student is anorphan if both parents are dead and the student doesn’t have anadoptive parent. Such a student is considered an orphan even ifshe has a legal guardian.

A student qualifies as a ward of the court if the court hasassumed custody of him. In some states the court may impose itsauthority over a juvenile who remains in the legal custody of hisparents; such a student is not a ward of the court. Also, neitheremancipation (when a child is released from control of a parentor a guardian) nor incarceration of a student qualify him as award of the court. A student declared a ward of the court before(and remaining so through) the end of the award year,regardless of his living arrangements, is considered anindependent student for that award year. If he has applied as adependent student, he must update his status (chapter 4).

■ Question 58 (veteran of the U.S. Armed Forces). For FSAeligibility, veterans are those who have been in active service(which includes basic training) in the U.S. Army, Navy, Air Force,Marines or Coast Guard and were released under a conditionother than “dishonorable”. There is no minimum amount oftime the student has to have served to be a veteran, but it doeshave to be active service.

The application also tells students to answer “Yes” to the questionabout veteran status if they aren’t yet a veteran but will be byJune 30, 2003. Students who attended a U.S. military academyfor at least one day and were released under conditions otherthan “dishonorable” count as veterans for Title IV purposes.Students currently attending a U.S. military academy and ROTCstudents are not veterans.

Members of the National Guard or Reserves are only consideredveterans if they were called up to active federal duty bypresidential order for a purpose other than training. It does notmatter how long the active duty lasted or if the student returnedto reserve status afterward, but, as with the other qualifyingveterans, the student must have had a character of service thatwas not “dishonorable.”

Legal dependent examplesGeorge is living with Emma. George isn’temployed, and has no income, soEmma is completely supporting him.Emma plans to continue supportingGeorge through the end of the awardyear, so she answers “Yes” to the legaldependent question when she fills outher FAFSA.

Laurel is going to college and is hercousin Paul’s legal guardian. Paulreceives Social Security benefits, butbecause he’s a minor, the benefits arepaid to Laurel on his behalf. Thesebenefits provide more than half ofPaul’s support and count as income toLaurel. Because Paul lives with Laureland will be supported by her (throughthe Social Security benefits) throughoutthe 2002-2003 award year, Laurelanswers “Yes” to the legal guardianquestion. Note that if Paul didn’t livewith Laurel, she would have to answer“No” to the question.

Early exit cadetsStudents who attend a service academyand are honorably discharged prior tocommission are veterans for FSA pur-poses but aren’t veterans for VA pur-poses. These students will likely receivematch results showing that they aren’tveterans. Just like other students whoreceive these match results, if the earlyexit cadet meets one of the other criteriafor independence, then no resolution isrequired. If, however, an early exit ca-det meets no other independence crite-ria, the school will have to perform a de-pendency override to make the studentindependent. Of course, the schoolmust have appropriate documentationof the student’s situation.

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Issues involving other sources of support for children and other household membersIf the applicant is receiving support from other parties to raise the child, is the child still considered a legal dependent?In the case of government programs that provide benefits for dependent children, those benefits should be consideredas part of the applicant’s support to the child. For instance, Temporary Assistance to Needy Families (TANF) and otherbenefits provided to applicants on the basis of their having dependent children are considered income to the applicant.Therefore, an applicant may be considered independent when one of the primary means of support for the qualifyingchild is the benefits the applicant is receiving or will receive for the child. (The Department does not follow the IRSGuidelines, which state that such recipients cannot claim their children as legal dependents because the assistanceprogram provides more than 50% of the children’s support.)

If one or both of the applicant’s parents are directly or indirectly providing more than 50% support in cash or otherassistance to the applicant’s child, then the applicant would answer “No” to the FAFSA question about legaldependents. “Indirect support” to the child includes support that a parent gives to the applicant on behalf of the child.

The situation is similar if the applicant is living with a parent and the parent is paying for most of the householdexpenses. In most cases, the applicant’s parent would be considered the primary source of support to the applicant’schild. Thus, the applicant would answer “No” to the question about legal dependents. However, there may be somecases where the applicant can demonstrate that she provides more than half of the child’s support, even while living athome, in which case the applicant would be considered independent and answer “Yes” to the question about legaldependents.


Dependency statusWho Counts as a Parent?

If the applicant answers “No” to questions 52-58, then she is dependent and must report parental information. In mostcases it’s clear who the parents are, but not always.

✔ Adoptive parents and stepparentsAn adoptive parent is treated just like a biological parent. For purposes of reporting income in Step 4, a stepparent isconsidered the equivalent of a biological parent if the student is dependent on the biological parent. However, astepparent cannot be the sole parent for determining dependency status—the student can only be a dependent of abiological or adoptive parent.

✕ Foster parents, legal guardians, and other relativesA foster parent or a legal guardian is not treated as a parent for SFA purposes. If the student’s parents are dead, thestudent is independent. Otherwise, a dependent student must report information about his or her parents even if he orshe has a legal guardian, unless the school has a documented reason to perform a dependency override.

If a student is living with his or her grandparents or other relatives, the same principle applies. Unless the relatives haveadopted the student, the income of the relatives should not be reported on the FAFSA as parental income. Any cashsupport from persons other than the student’s parents should be reported as untaxed income, as discussed in Step 2. Theschool may also consider other kinds of support as part of the student’s financial resources and use professionaljudgment to include the support under the item for student’s untaxed income (see chapter 4 on professional judgment).

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Dependency status

Veterans match (for question 58)The FAFSA processing system also performs a match with the Department of Veterans Affairs (VA) records to confirm a student’sveteran status. If the student answers “Yes” to the question about veteran status, the Department will send the student’sinformation to the VA for matching. The VA will see whether the student is a veteran, and send the results back to the CPS. Thematch results are provided by a match flag in the FAA Information Section of the output document.

Successful matchThere won’t be any comments on the output document if the VA confirms that the student is a veteran.

Not a veteranIf the VA reports that the student isn’t a veteran, the CPS assumes that the answer to the veteran question is “No.” Note thatbecause the VA’s definition of “veteran” for VA benefits is more stringent than FSA’s definition, the student might still be eligible forfinancial aid. There will be a comment on the output document for the student explaining the problem. If the VA results arewrong, the student should contact a regional VA office to have the records corrected and get proper documentation. However, ifthe student answered “Yes” to one of the other dependency questions, he or she is an independent based on that question and canreceive student aid without resolving the VA problem. If the student answered “No” to all the other dependency questions, he orshe is treated like a dependent student until the VA records are updated. Once the records are updated, the student can submit acorrection marking the answer to the veteran question as “Yes” to have the VA perform the match again. If the student hasdocumentation (such as a DD214---the Certificate of Release or Discharge from Active Duty---with “Character of Service” asanything but “dishonorable”) showing that he or she is a veteran, the school can do a dependency override to treat the student asindependent and allow the student to receive aid before the problem with the VA database is resolved. Also, if a NationalGuardsman or a Reservist who served on active duty (for other than training) did not receive a DD 214 but can obtain a letter froma superior officer that documents the call-up to active duty and that classifies the Character of Service as anything but“dishonorable,” the student will be considered a veteran for FSA purposes.

Not on databaseIf the student isn’t listed on the VA database, the CPS assumes that the answer to the veteran question is “No.” Again, there will bea comment explaining the problem on the output document. A student who answered “Yes” to one of the other dependencyquestions doesn’t need to resolve the problem before receiving student aid, although he or she should have the VA correct itsdatabase if it’s wrong. A student who answered “No” to the other dependency questions is treated like a dependent student untilhe or she resolves the problem with the VA. The student must either provide parental data or resolve the problem with the VA andsubmit a correction marking the answer to the veteran question as “Yes” to have his or her veteran status confirmed. As mentionedabove, the school can also do a dependency override if the student provides documentation that he or she is a veteran.

Active dutyIf the student is currently on active duty, he isn’t a veteran yet. However, if the student’s active duty status will end by June 30,2003, he is counted as a veteran for purposes of dependency status. Because the student might be a veteran later in the year, theCPS doesn’t assume that the answer to the veteran question is “No.” A student who is already independent by one of the otherindependence criteria doesn’t have to resolve this situation. Otherwise, the student must provide documentation to the school thathe will be released from active duty by June 30, 2003 before the school can disburse aid.

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Veteran Status MatchResult Comment

number and textAction needed

Successfulmatch.Match Flag 1

No comment. No resolution required.

Dependent andrecord found onVA database butnot a qualifyingveteran.Match Flag 2C Code

162 The Departmentof Veterans Affairs (VA) didnot confirm that you are orwill be a qualifying veteranfor purposes of receivingfederal student aid for the2002-2003 school year.If VA is correct, you mustprovide your parents’information (includingsignature) on this SAR ifyou have not already doneso. If you believe you areor will be a qualifyingveteran, contact a VAoffice to resolve thisproblem.

Resolution required. In this situation, CPS assumes No to the veteranstatus question. If the parents’ data or signature were not provided, reject15 or reject 2 would also appear on the SAR/ISIR.

If the student believes the match results are wrong, the student shouldcontact a regional VA office to have VA records updated. The student willthen need to correct the veteran question to Yes, which will generate acorrection that will be sent to VA for rematching.

While the student is resolving the discrepancy with the VA, the FAA maycollect documentation from the student that clearly demonstrates he is aveteran. The student might provide the DD214 (military separation form)showing that “character of service” is other than “dishonorable.” However,until the information is corrected in the VA database, the match resultswill not change. If the documentation confirms that the student is aveteran, the FAA may do a dependency override and then disburse aid tothe student.

Independentand record foundon VA databasebut not aqualifyingveteran.Match Flag 2

163 The Departmentof Veterans Affairs (VA) didnot confirm that you are orwill be a qualifying veteranfor the 2002-2003 schoolyear. If VA is not correct, youshould contact a VA officeto resolve this problem.

No resolution required. The CPS assumes No to this question, however,the student qualifies for independent status based on the responses toother dependency status questions.

The student may contact a regional VA office to have VA records updated.The student could then answer Yes to the veteran question, which willgenerate a correction that will be sent to the VA for rematching. Until theVA database is corrected, the match results will not change.

Dependentand record notfound on VAdatabase.Match Flag 3C Code

173 The Departmentof Veterans Affairs (VA) didnot confirm that you are orwill be a qualifying veteranfor purposes of receivingfederal student aid for the2002-2003 school year.If VA is correct, you mustprovide your parents’information (includingsignature) on this SAR if youhave not already done so. Ifyou believe you are or willbe a qualifying veteran,contact a VA office toresolve this problem.

Resolution required. The CPS assumes No to this question. If the parents’data or signature were not provided, reject 15 or reject 2 would alsoappear on the SAR/ISIR.

If the match results are wrong, it’s likely that the military branch orDepartment of Defense has not sent the data to the VA. The studentshould contact a regional VA office to have VA records updated. Thestudent will then need to correct the veteran question to Yes so that hisinformation will be rematched with the VA database.

While the student is resolving the discrepancy with the VA, the FAA maycollect documentation from the student that clearly demonstrates he is aveteran. The student might provide the DD214 showing that “characterof service” is other than “dishonorable.” If the documentation confirmsthat the student is a veteran, the FAA may do a dependency override andthen disburse aid to the student.

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Dependency OverridesThe Higher Education Act allows an aid administrator to make

dependency overrides on a case-by-case basis for students withunusual circumstances. If the administrator judges that an overrideis appropriate, he/she must document the unusual circumstances.However, none of the conditions listed below, singly or incombination, qualify as unusual circumstances or merit adependency override:

1) Parents refuse to contribute to the student’s education;2) Parents are unwilling to provide information on the

application or for verification;3) Parents do not claim the student as a dependent for income

tax purposes;4) Student demonstrates total self-sufficiency.

Veteran Status Match (continued)

Independentand record notfound on VAdatabase.Match Flag 3

174 The Departmentof Veterans Affairs (VA) didnot confirm that you are orwill be a qualifying veteranfor the 2002-2003 schoolyear. If VA is not correct, youshould contact a VA officeto resolve this problem.

No resolution required. The CPS assumes No to this question, but thestudent is independent for other reasons.

It’s likely that the military branch or Department of Defense has not sentthe data to the VA. If the student is a veteran, he may contact a regionalVA office to have VA records updated. The student could then answer Yesto the veteran question, which will generate a correction that will be sentto the VA for rematching.

Record found onVA database butapplicant onactive duty.Match Flag 4C Code

180 The Departmentof Veterans Affairs (VA) hasconfirmed that you arecurrently serving in the U.S.Armed Forces. Youindicated on yourapplication that you will bereleased from active dutyby June 30, 2003. You mustprovide documentation ofthis to your Financial AidAdministrator before youcan receive federal studentaid.

A student who is already independent by one of the other criteria doesn’thave to resolve this problem. Otherwise, the student must providedocumentation to the school that shows upcoming release orders froma military branch, typically in memorandum format or letter, stating intentto release. There is no requirement to reconfirm actual separation duringthe award year.

Result Commentnumber and text

Action needed

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Unusual circumstances do include an abusive familyenvironment or abandonment by parents and may cause any of theabove conditions. In such cases a dependency override might bewarranted. See Chapter 4 for more information on otherprofessional judgment changes.

An aid administrator may override only from dependent toindependent. However, if an independent student is receivingsubstantial support from her parents, a school may use professionaljudgment to adjust one or more of the FAFSA data elements, such asuntaxed income. Also, an aid administrator can cancel an overrideapproved at another school.

To override the student’s dependent status on an initial applicationthrough EDE, the aid administrator should use the DependencyOverride code of “1” (see the Application Processing Desk Reference or theEDE Technical Reference for more information).

To authorize a dependency override on a paper FAFSA, the aidadministrator marks the oval for an override, labeled “D/O,” in the“School Use Only” box, fills in the school’s Federal School Code, andsigns. A separate letter attached to the application in lieu of makingthe override is not acceptable.

If the student has already applied, the FAA can use EDE or,beginning in spring 2002, FAA Access on the Web to authorize orcancel an override; overrides are no longer possible on the SAR.

FAFSA School Use Only Box

SCHOOL USE ONLY:

D/OFAA Signature

Federal School Code

1

1

STEP 3Dependency

Overrides

Dependency OverridesHEA Sec. 480(d)(7)

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STEP FOUR (DEPENDENT STUDENTS ONLY)—PARENTS’ INFORMATION

Purpose: Questions 59-69 collect information about the student’sparents and their household. Questions 70-83 collect income andasset information for the parents. These questions are answered inthe same way as for the student, so we have noted the equivalentitems where they are discussed under Step 2.

■ Questions 60-63 (parents’ name and SSN) The FAFSA asks for theparents’ social security numbers and last names in preparationfor a future match with the IRS on AGI, taxes paid, number ofexemptions claimed, and filing status. If the student doesn’treport last name and SSN for at least one parent, the SAR andISIR will contain a comment highlighting this. These arerequired data elements for the FAFSA; however, because thematch is not yet in place, applicants who do not provide thisinformation will still be eligible for financial aid. Aidadministrators may encourage students to report thisinformation but are not required to follow up with students if it’smissing.

■ Question 64 (household size) The size of the householddetermines the amount of the standard living allowance that isused as an offset to the family income when calculating the EFC.The following persons may be included in the household size ofa dependent student’s parents:

➔ The student and parents, even if the student is not living withthem. Exclude a parent who has died or is not living in thehousehold because of separation or divorce.

➔ The student’s children and siblings, regardless of where theylive, if they will receive more than half their support from thestudent’s parent(s) from July 1, 2002 through June 30, 2003.This includes unborn children and siblings of the student whowill receive more than half support from the student’s parent(s)from birth to the end of the award year. It also includes siblingswho would be considered dependent based on the FAFSAdependency questions (i.e., they need not be students nor applyfor aid).

For the purpose of including children in the household size, the“support” test is used, rather than residency, because there maybe situations in which a parent supports a child who does notlive with him or her, especially in cases where the parent isdivorced or separated. If the parent receives benefits (such associal security or AFDC payments) in the child’s name, thesebenefits must be counted as parental support to the child.

➔ Other persons who lived with and received more than half theirsupport from the student’s parent(s) at the time of applicationand will continue to do so throughout the award year.


Parent informationFSA and IRS household rulesThe rules used for determining whetheror not someone can be counted in thehousehold for FSA purposes aren’t thesame as the IRS rules for determininghousehold members or dependents.Whether a divorced or separated parentclaims a child as a dependent on thetax form is irrelevant when decidingwhose household the child belongs tofor FSA purposes.

Example: surviving parent andstepparentMeurig’s parents divorced when he wasseven; his mother later remarried, andMeurig lived with his mother andstepfather. His stepfather didn’t adopthim. His mother died in 1999, but hisfather is still living. Meurig doesn’t meetany of the independence criteria, so he’sa dependent student. Because hisfather is his only surviving parent,Meurig needs to report his father’sinformation on the form, even thoughhe’s still living with and beingsupported by his stepfather.

Dependent student householdsize exampleLydia is a dependent student. Herparents are married, so they are bothincluded in the household size. Herbrother Ron is 26 but is still beingsupported by their parents, so he isalso included. Her sister Elizabeth isattending college but is an independentstudent and isn’t supported by theirparents, so she isn’t included in thehousehold size. Her sister Susan is notattending college, but is working andsupporting herself. However, if Susanwere to apply for student aid, shewould be considered a dependentstudent, so she is included. Therefore,the household size that Lydia reports forher parents is 5.

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Reporting information in cases ofdeath, separation, divorce, and remarriageIf the parents of a student divorce or separate, a student must answer parental questions on the FAFSA as they apply to thesurviving or responsible parent.

Surviving parentIf one, but not both, of the student’s parents has died, the student will answer the parental questions about the survivingparent and won’t report any financial information for the deceased parent on the FAFSA. If both the student’s parents are deadwhen the student fills out the FAFSA, the student must answer “yes” to Question 58, making the student independent.Remember that an adoptive parent counts as a parent too, but a legal guardian doesn’t. If the last surviving parent dies afterthe FAFSA has been filed, the student must update his or her dependency status and report income and assets as anindependent student.

StepparentA stepparent is treated like a biological parent if the stepparent is married, as of the date of application, to a student’sbiological parent whose information will be reported on the FAFSA or if the stepparent has legally adopted the student. Thereare no exceptions. A prenuptial agreement does not exempt the stepparent from providing information required of a parenton the FAFSA. The stepparent’s income information for the entire base year, 2001, must be reported even if the parent andstepparent were not married until after 2001.

Divorce of the student’s parentsIf the student’s parents are divorced, he should report the information of the parent with whom he lived longer during the pastyear, regardless of which parent claimed him as an exemption for tax purposes. If the student lived equally with each parent ordidn’t live with either one, then he should provide the information for the parent from whom he received more financialsupport or the one from whom he received more support the last time it was given.

Separation of the student’s parents or the student and spouseA couple doesn’t have to be legally separated in order to be considered separated. The couple may consider themselvesinformally separated when one of the partners has left the household for an indefinite period of time. Usually a marriedcouple that lives together can’t be considered informally separated. However, in some states, a couple can be consideredlegally separated even if they still live together. If the couple’s state allows this, and they are legally separated, then they areconsidered separated though they are still living together. For a dependent student, use the same rules as for divorce todetermine which parent’s information must be reported.

Common-law marriageIf a couple live together and have not been formally married but meet the criteria in their state for a common-law marriage,their status should be reported as married on the application. If the state doesn’t consider their situation to be a common-lawmarriage, then they aren’t married, and a dependent student should follow the rules for divorce to determine which parent’sinformation should be reported. Check with the appropriate state agency concerning the definition of a common-lawmarriage.

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■ Question 65 (number in college) The EFC calculation accountsfor the additional expenses of other students in the household.The student should always be included in the number in college.Others in the household are counted in the number in college ifthey are or will be enrolled at least half time in a degree orcertificate program during the award year at a Title IV-eligibleschool (one eligible for any of the SFA programs). Parents areexcluded from the number in college.

■ Questions 66-69 The parents’ state of residence and the olderparent’s age are used in the federal need analysis. Parents whodo not live in the US should enter “FC” for Question 66.

■ Questions 70-83 (tax forms filed by parents, income and assets) Thecriteria for reporting income, assets, and the tax forms filed areessentially the same for parents as for the student, so you shouldrefer to the discussion in Step Two for information on how to fillout questions 70-83.

STEP FIVE (INDEPENDENT STUDENTS ONLY)—HOUSEHOLD SIZE & NUMBER IN COLLEGE

Purpose: Questions 84 and 85 collect information aboutindependent students. Only students who answered “Yes” to one ormore questions in Step Three complete this step.

■ Question 84 (student’s household size). The following personsare included in the household size of an independent student:

➔ The student and his or her spouse, unless the spouse has diedor is not living in the household because of separation ordivorce.

➔ The student’s children, regardless of where they live, if they willreceive more than half of their support from the student fromJuly 1, 2002 through June 30, 2003. This includes the student’syet unborn children who will receive more than half theirsupport from the student from birth to the end of the awardyear.

➔ Other persons who lived with and received more than half theirsupport from the student at the time of application and willcontinue to do so for the entire award year.

■ Question 85 (number in college) The student should always beincluded in the number in college. Other members of thehousehold are counted if they are or will be enrolled at least halftime in a degree or certificate program during the award year ata Title IV-eligible school. The definition of half-time enrollmentfor this question must meet the federal requirements, even if theschool defines half time differently. (See Volume 1: StudentEligibility for enrollment status requirements.)


Student household

Death, separation, divorce citeHEA Sec. 475(f)

Divorce exampleMarta is 22 and doesn’t meet any of theindependence criteria. Her parents di-vorced recently, and she hasn’t livedwith them since she was 18. Also, nei-ther parent provided support in the pastyear. The last time she received supportfrom her parents was when she livedwith them and they were still married.Because her father’s income was largerand he contributed more money to theoverall household expenses, Marta de-termines that the last time she receivedsupport, most of it was from her father.She provides his income on the form.

Number in college citeHEA Sec. 474(b)(3)

Independent student householdsize exampleEddy is an independent student. He wasmarried, but now he and his wife haveseparated. He’s paying child support,but it isn’t enough to provide more thanhalf his children’s support, so he can’tinclude his children in his householdsize. Eddy’s nephew Chavo lives withhim and gets more than half of hissupport from him. Because Chavo liveswith Eddy, he can be counted in thehousehold size. Therefore, Eddy’shousehold size is 2.

Having just turned 24, Chavo is also in-dependent. Although he’s living withEddy, he’s not providing any support toEddy. Chavo’s household size is 1.

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STEP SIX: SCHOOL INFORMATIONPurpose: These questions collect information about which

postsecondary schools the student wants to receive his or her FAFSAinformation. The student can list up to six schools, and ED will sendthe student’s information to each school listed.

For each school, the student is asked to indicate whether he orshe expects to live on campus, off campus, or with his or her parents.While this information is not used to calculate the student’s EFC, it isuseful to the schools listed in projecting the student’s financial needbecause housing costs will be part of the cost of attendance.

If the student wants information sent to more than six schools,she can use her SAR to change the schools listed or go toCorrections on the Web. Chapter 4 describes how a student can addor change schools on the list. Note: ED’s central processor will senddata to no more than six schools at a time for one student. Forexample, if a student originally listed six schools on the applicationand then updated or corrected information on the SAR orCorrections on the Web and replaced all six schools with newschools, only the six newly listed schools would get the updated orcorrected data.

For a college to receive a student’s data, the student must list thecollege’s federal school code or enter the college’s complete name,address, city, and state. School codes are not provided in the FAFSA;they are in a separate publication, the Federal School Code List. EDsends this list to high schools, colleges, and public libraries each fallaround the same time the FAFSAs are distributed. The federalschool codes are also on the Internet at http://fafsa.ed.gov.


School information

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STEP SEVEN: SIGNATURE REQUIREMENTSPurpose: By signing the FAFSA, the applicant is assuming

responsibility for the accuracy of the information reported on theform.

■ Questions 98-99 In addition to certifying that the data on theFAFSA is correct, the student is also signing a Statement ofEducational Purpose, which is required to receive FSA funds.Among other things, the student agrees to spend the FSA awardonly on educational expenses and affirms that he is not inarrears on federal loans or grants. If the student is dependent,one parent whose information is reported on the FAFSA mustalso provide a signature.

■ Questions 100-102 The law requires that if anyone other than astudent, the student’s spouse, or the student’s parents preparesthe application, then the preparer must write in his or her name,the firm/company name (if applicable), the firm/companyaddress, and either the firm/company’s Employer IdentificationNumber (EIN, as assigned by the IRS) or the preparer’s SSN.The preparer must also sign the form.

High school counselors, aid administrators, and others who helpstudents with their applications by actually filling out line itemson the form or dictating responses to items on the form areconsidered preparers. Preparers must complete this section evenif they are not paid for their services.


Signatures

Substitutes for a parent’s signatureAlthough parental information must be provided for a dependent student, a highschool counselor or a postsecondary school’s aid administrator may sign theapplication in place of a parent if:

• the parents are not currently in the United States and cannot be contacted bynormal means,

• the current address of the parents is not known, or

• the parents have been determined physically or mentally incapable of providing asignature.

The signature of a counselor or aid administrator serves as a mechanism to get theapplication through the processing system. The counselor or aid administrator mustprovide his or her title in parentheses next to his or her signature and briefly statethe reason (only one reason is needed) why he or she is signing for the parents. Thecounselor or aid administrator assures a minimum level of credibility in the datasubmitted. However, the counselor or aid administrator does not assume anyresponsibility or liability in this process. If the aid administrator finds anyinaccuracies in the information reported, he or she should direct the student to sendthe SAR through the normal correction process or should submit corrections throughEDE.

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Signatures for electronic applications

Electronic Data ExchangeIf a student applies through EDE at your school, you must obtain the signatures on a completed paper FAFSA or on the“echo document” printed through EDE, and you must keep the signed document (original or imaged) in the school fileseven if the student doesn’t receive federal student aid or doesn’t attend your school.

FAFSA on the WebStudents who have PINs can electronically sign their FAFSA on the Web. Parents who have a PIN can also electronicallysign. Both parents and students will have to provide their name ID (first two letters of their last name), SSN, and date ofbirth along with the PIN. Parents also must provide their child’s name ID, SSN, and DOB in order to match the parent’ssignature record with the student’s FAFSA. See Action Letter #7 (Feb. 2001) for more details.

Alternately, students can print the signature page, sign it, and mail it to the processor. If the processor doesn’t receive thesignature page within 14 calendar days of receiving the application data, it will mail a “reject 16” SAR to the student (“nostudent signature on an electronic application”), which the student can sign and return. If the student chooses not toprint and send a signature page, or if no printer was available, the processor won’t wait 14 days to print a rejected SAR forthe student, but will generate one within 72 hours of receiving the data.

If the student indicated on an electronic FAFSA that she would print, sign, and mail in a signature page but the processorhas not received the signature page, the student can call FAFSA on the Web customer service and have her recordreleased from the FAFSA hold file. Because no signature page has been received, the FAFSA processor will produce arejected SAR and mail it to the student to sign and return. The processor will accept the first signature document itreceives—either the signed signature page or the signed SAR.

Schools and states receive ISIRs for rejected records. A student’s reject 16 SAR and her ISIR will reflect the data that sheprovided on the application; however, the CPS won’t calculate an EFC for the student or do any database matches until itreceives a signed signature page, a signed SAR, or an electronic signature. A school can also collect the requiredsignatures at the school, either on the SAR or a document that has the required certification statements (EDExpressallows schools to print out a signature page for the ISIR). The school can then submit an electronic correction showingthat the signatures have been provided.

Renewal FAFSA on the WebTo access their Renewal FAFSA on the Web, students must provide their PIN along with other identifiers. In addition toallowing access to application data over the Internet, the PIN is a legal equivalent to a manual or “wet” signature for FSApurposes. For an independent student, no other signatures are needed, and the application will be processed within 72hours.

For dependent students parents can sign with their own PIN. Otherwise, the student can print a signature page for theparent. If the student indicates that no printer was available, the CPS will generate a “reject 15” (no parent signature)output document for the student within 72 hours. If the student indicated she would send in a signature page, theprocessor will wait up to 14 calendar days to receive the signed page. If it doesn’t receive a signed signature page after14 days, it will generate a reject 15 SAR and send it to the student. The student must have a parent sign the SAR andmust send it back to the address on the SAR. For reject 15 records, a student’s SAR and ISIR will reflect the data providedon the application, but the processor won’t calculate an EFC for the student until it receives the parent’s electronicsignature or the signed SAR or signature page.

Signature requirements for changes made after the FAFSA is filed will be discussed in chapter 4.

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Signature Requirements: Application and Verification for all FSA programs

Application(FAFSA, FAFSA on the Web, EDE,FAFSA Express)

IRS Forms1040 or other form submittedfor verification

Verification Worksheet

Must sign statement that dataare accurate (on paper FAFSA,echo document, or signaturepage; or by use of PIN)

Tax return must be signed bystudent (or spouse) or by thetax preparer (or preparer’sstamp)

Must sign worksheet

One parent must signstatement that data areaccurate (on application, echodocument, or signature page)

Tax return must be signed byone parent or by the taxpreparer (or preparer’s stamp)

One parent must sign

Must certify ifoverridingdependency status

Student

Parent(s)(if student isdependent)

Student

Parent(s)

AidAdministrator

(if student isdependent)

Changes via SAR orCorrections on the Web

Changes submittedvia EDE

Professional Judgmenton SAR or through EDE

Must sign corrections statementon Part 2 of SAR: on the Web, thePIN serves as the student’ssignature.

School must have signeddocumentation

Must certify for adjustmentsor dependency override

One parent must sign thecorrections statement on Part 2of the SAR; if parental data ischanged on the Web, page mustbe printed and signed byparent.

School must have signeddocumentation

Signature Requirements for Changes *

AidAdministrator

*These signature requirements apply to any submission of changes to the Central Processing System, whether required by regulation (for Pell Grant recipients orcorrections to data match items) or at the discretion of the financial aid administrator (for campus-based aid and Stafford Loans).

Filling Out the FAFSA

Documents

Transcript of Filling Out the FAFSA